In the last 12 months Sofia office market became a witness of several new office building projects emerging on the market. The construction companies became confident enough to start investments in new office buildings due to the great demand for such office premises in Sofia and the stable rental levels.
In the capital Sofia has been completed the largest office project for 2015 – Capital Fort and was signed the largest rental deal for 7300 sq.m of office area. In the second half of the year started the construction of the fourth phase of Expo 200 and also the construction of the new project along Tsarigradsko Schousse Blvd . – Bernard Investments. This means that the planned office buildings the construction of which has already started and which will be completed by 2018, reach total area of 450 000 sq.m. The rental levels of Sofia offices remain around 12.5 Euro/sq.m. for the offices of class A.
Until very recently, Schengen Zone was perceived as the main engine for the European Integration. With the crisis that started in 2009, many important changes in the European Union legislation happened. Since the refugee crisis outbreak, there was one integration ship’s mast that was visible and it was associated with the euro area. The crisis with the refugees placed the existence of the European Union to a very serious test. And now as the threat is not over yet, a new integration ship is to be seen – that of Schengen. The reason for that lies in the terrorist attacks in Paris, dating 13th November, when 130 innocent people have lost their lives and many others were injured.
Because of the refugee crisis, the Schengen zone had a very central stage in the disintegration forecasts. And the terrorist attacks in Paris changed that situation to a significant level. The feelings of solidarity with France made way for the integration deepening in the sphere of counter-terrorism and security within Schengen.
During the emergency meeting of the ministers of justice and home affairs on 20th November, it became clear that the answer to the terrorist attacks should come from Europe as a whole and not from the individual nations. According to the European program for security, that should be based on a mutual trust. That however, is bad for the countries that are outside the Schengen area, as these countries are either not ready or there is no trust in them. Bulgaria is not a member of the Schengen zone, even if it protects the outer borders of the European Union and is technically ready to become a member for many years now.
The ministers gave a task to the European Council to prepare a proposal for changing the code on the Schengen zone borders. This means that there will be a legal ground on which to be made a systematic control of EU citizens and collection of biometric information. The ministers also requested for widening the mandate of the European border agency Frontex and for establishing regional information exchange platforms with the Western Balkans states. This means that there is no trust in Romania and Bulgaria, as the two states remain outside the Schengen zone. And even if the Schengen information system is working in Bulgaria, the system is not fully opened to the country.
Yet, as a conclusion from the meeting, it became clear that Schengen is not falling apart but is integrating.
The rental levels of Sofia offices are expected to go up in the next three years according to the association of the owners of business centers in Bulgaria. In a recent interview, the chairperson of the association stated that year 2015 was very active for the office market in Sofia with a serious demand for spacious office premises. That is so as the large international companies are not only staying in the country, but also they are enlarging their activities, hiring more employees and thus in need of more space.
The offices in Sofia that have been rented in 2015 were much larger than the ones rented 3-4 years ago. In 2015 there were deals signed for the rental of Sofia office of 7000 sq.m. Other serious deals signed were for 3500 sq.m in the Sofia Airport Center, as well as in the business centers Expo 2000, East Trace Center, etc. The fact is that when one company moves to a bigger office in Sofia, her former office is immediately taken by another company. This means that the market goes up and that there is positive development for it ahead of time. That is why several new projects for office buildings are being planned and are expected to be implemented. The current rental levels vary from 10.5 Euros to 13 Euros, but there is prognosis for increase in the rental levels to 14-16 Euros/sq.m in the recent years.
In a recent speech at the European Parliament in Strasbourg, Jean-Claude Juncker – the Commission President of the European Union warned the public that the Schengen zone is in a “partly comatose” stage. Juncker further stated that if that eventual collapse of the Schengen Area becomes a fact, this might have negative effect and bad political consequences for the European Union and the common currency – the Euro.
Juncker stated that if Schengen zone fails, than the single currency of the union will make no sense. The travel free Schengen area, of which Bulgaria is still not a member, is facing the impact and the consequences from the terrorist attacks in Paris and the migrant crises that is lasting for such a long period. The borderless Schengen area has been under serious pressure as it was revealed that several of the attackers moved freely throughout Europe, claiming to be refugees from Syria. According to the Commission President, the reintroduction of the checkpoints at the national borders between the member states of the European Union will have immediate and direct effect on the common European Union currency.
After the terrorist attacks in Paris, several temporary border controls have been reinforced in several EU member states in an attempt for the migration flow to be diverted. The Commission President of the European Union further stated that we all have to keep the spirit that stays behind the Schengen zone.
A growing number of international and local companies are now looking for offices of class A in new business centers that are still in the of-plan stage, waiting for the start of the construction. That is so, as there are not many large offices available in Sofia to meet the needs of the outsourcing companies that expand their business in Bulgaria. The office projects that were released in 2015 like Capital Fort and Trade Center Europe are already operating and a great percentage of their premises has been rented out.
On the grounds of that serious demand for offices of class A in Sofia, many new office projects have started and the office premises that will be ready by the end of 2015 are believed to reach 100 000 sq.m. The construction companies are stimulated to build new business centers in Sofia as many international companies are relocating their offices in search of larger and more spacious working premises. These outsourcing companies are looking for bigger offices of highest quality.
Currently, the available office space in the most sought after office buildings in Sofia is only 2 %. The rental levels remain the same, though there is a tendency for the rental price to go up.
In a recent visit in Bulgaria the UK Prime Minister David Cameron has visited the country’s border with Turkey, which happens to be an external border of the European Union. David Cameron urged the other nations to follow the example of Bulgaria and said that the countries from the European Union are facing a flow of migrants and should make efforts to control their borders.
According to Cameron, it is very important for Europe to have strong external borders by sea, air and land like the one Bulgaria has with Turkey. In 2015 around 27 000 migrants came through the 150 mile border between Turkey and Bulgaria, which is still not part of the travel free and border free Schengen but acts as an external border of the European Union.
The countries from the European Union are facing an increasing influx of migrants and they should learn from the Bulgarian efforts to keep the external controls, said the UK Prime Minister David Cameron at the border with Turkey. The states of the European Union have agreed to take emergency action in order to shore up the external borders of the union with stricter control.
The high-quality office premises in Sofia have been running out for quite some time and as a result, the rental prices started increasing reaching pre-crises levels. This means that the prices of the class A office premises in Sofia are heading towards the levels 14-16 Euro/sq.m. Due to the lack of supply, many companies are now ready to get offices in off-plan business centers and wait for them to be completed.
Throughout 2015, the office demand in Sofia has increased by 15-20 % with almost no supply at all in the center. According to the data, the number of the available offices in Sofia in the middle of 2015 has dropped to 25 % and to 2 % in the most sought after places in the capital of Bulgaria. Among the most desired business zones in Sofia are placed around the boulevards “Tsarigradsko Shosse”, “Cherni Vrah” and “Dragan Tsankov”.
The recently completed business center Capital Fort, which is also the tallest building in the country, is renting offices fast. These companies are mainly in the high technologies and the IT sectors, as well as the outsourcing. Under construction is the Trade Center Europe near Sofia Airport, where 50 % of the office premises are already rented out. The office market in Sofia is being driven by large companies looking for more spacious office premises of a class A quality.
Schengen is a dream about Europe living with no borders and no passport controls. During the Justice and Home Affairs Council in 9th October 2015, the Minister of Interior and the Deputy Prime Minister for Coalition Policy and Public Administration Rumyana Bachvarova stated that Bulgaria becoming a member of the visa free Schengen Area is a matter of security for the entire European Union.
During the sessions of the EU Justice and Home Affairs Council, the Luxembourgish Minister of Foreign and European Affairs Jean Asselborn stated that he wants to thank Bulgaria for all the efforts made in the protection of the external border of the European Union, even if not being a member state of the Schengen zone. The Minister of Interior of Bulgaria stated that today Bulgaria’s joining the Schengen Area is a matter of security of the entire EU. She further stated that the external border management of Bulgaria was directly related to the most recent challenges to the EU connected with migration processes. She stated that this requires coordinated, joint, and collective response on the part of all EU member states and that Bulgarian cannot adequately contribute to joint efforts in this direction as it is still not part of the Schengen Area.
If Bulgaria is a member state of the Schengen Area, the county will be in the position to use the full set of instruments of Schengen legislation which will lead to more comprehensive prevention – checks on the Schengen Area visas, proper usage of the Schengen Information System, etc. Since joining the EU Bulgaria has managed to ensure a serious protection of the EU borders, making the needed efforts despite the limited access to such systems and the limited resources of the country.
The real estate agents have recently stated that around 250 000 sq.m of office premises are to enter the Sofia market by 2017. Approximately one third of these were planned to be opened until the end of this year. Serious activity is found at the projects for Sofia office buildings and many of them are under construction. The first six months of 2015 were characterized by very low levels of class A office availability in Sofia – less than 4 %.
The serious activity on the office market in Sofia is due to the great number of outsourcing companies that are moving their business to the capital of Bulgaria. Most of them are international companies working in the sphere of outsourcing and in the IT sector. These companies are paying between 10.5 and 12.5 Eur/sq.m for Sofia offices of class A and another 2 to 3 Euro/sq.m for the maintenance of these offices. The expectation of the real estate agents is for these levels to remain the same at the beginning of 2016.
Just before the EU summit in October, the Deputy Prime Minister of Bulgaria Meglena Kuneva raised the question about Bulgaria and its membership in the Schengen area. She stated that the fact that Bulgaria has not joined Schengen several years ago along with its entering the European Union and today that is not only a problem for the country, but also a problem of the European Union. According to the Deputy Prime Minister, it is of high importance for Bulgaria to receive a date, no matter when the accession will happen, as it is the horizon that matters.
Bulgaria not being part of the Schengen security zone of the European Union puts the country in the position of no man’s land. This position makes it impossible for the country to take care of its security and for the European security. Bulgaria does not know whether to contribute to the Schengen improvement as it does not know when it will join, and yet the country cannot belong to a different alliance, as it has already committed to this one.
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